Jul 07 - Bossino Highlights Government “Overspending” – Read Full Budget Speech
This is a debate on the Appropriation Bill. It is not, as such, a debate purely on the figures. It is in reality an opportunity for each of us to take stock and assess where matters lie generally and in our particular areas of responsibility. I have many. Since I assumed responsibility for financial services I shadow a total of seven areas spanning four different Ministers, or 40% of the cabinet.
As has been a constant theme in the contributions made by my honourable friends, recurrent expenditure in each of the departments which I shadow have been the subject of increases. The Leader of the Opposition has already made a reference to the astronomical increase that there has been in terms of recurrent expenditure. All of this from a Government which electioneered on the strength of an argument which said that we were in the midst of financial ruin – who can forget the Chief Minister’s statements frantically describing what every man woman and child would owe in debt or his ministerial statement to the nation on 18th January, 2012, which he claimed he was forced to make from No6 given the ‘seriousness of the position’ as he put it (I am sure he was just longing to give one).
Who can believe them now? Who can accept that with the very little new and real investment which has come to the economy in the wake of the arrival of the New Dawn (something which the Chief Minister promised when he was first interviewed as the Leader of the Opposition in 2011), they are able to relish in a spending spree. Does the answer not rest with the fact that they were less than candid at the time of the election and that in fact what they inherited was not financial Armageddon but a treasure trove which they are showing no compunction in spending at will? THAT is the answer, they know it to be true and the electorate know it to be true and they will pay the electoral price for it.
I was criticised last year by the Chief Minister for not dealing with the figures. Well that is not true. I have reviewed the Budget Book as all my colleagues have, but if I had not, then he should have been well advised not to have encouraged me to look at it again because it makes very depressing reading for him.
It is not one of my areas but I will be permitted just for one moment to refer to a particular item of expenditure. Head 2 (13), where we see that there is a Forecast Outturn for 2013/2014 of £1,050,000, when the estimated figure was £320,000, a difference of £730,000. Talk about sticking his snout in the trough. This from a man who used to analyse like a forensic accountant the former Chief Minister’s travel arrangements, whether he used the VIP lounge became matters of national importance for him. Of course we now know that he was not necessarily behaving in this way because he wanted to make political mischief but in fact because he was green with envy. He was probably thinking, ‘you just wait till I’m Chief Minister’.
Let’s look at some of the departments for which I have shadow responsibility:
(i) The contribution to Borders and Coastguard Agency has increased by £887,000 from an actual expenditure of £3.8M to £4.7M.
(ii) Civil aviation had an estimate of £2.5M with a forecast outturn of £3.2M.
(iii) In Employment and Labour, the Actual expenditure for 12/13 to the estimate for 14/15 has increased by £2.5M, a department which has seen a 15 fold increase in expenditure in their time in office.
(iv) The estimated figure for 14/15 for the Port and Shipping head is also up from the forecast outturn for 12/13 by £713,000.
(v) Financial services too there is an increase whichever way you look at it but the comparison between the estimate for 14/15 and actual expenditure for 12/13 amounts to £340,122.
(vi) Tourism has had an overrun for 13/14 of £485,000, with a difference of £739,592 between the estimated figure for this year and the actual expenditure for 12/13, figures which had themselves already overrun last year by almost half a M.
Proof, just in my areas of responsibility that they have been able, in two very short years to spend there way through this Parliament when there was no money in the first place.
Tourism
What we have heard of the Minister’s contribution has to be seen in the backdrop of the very much increased expenditure. It would really be a very sad case of supreme Ministerial incompetence in the discharge of his duties if he was unable to account for some measure of success. He really is throwing money at it.
But one is duty bound to remove the spin and look at the facts as shown by the statistics as best we can. There is one attribute which the Minister has and that is this ability to use fantastically sounding adjectives to hype things up, we see them time and again in his press releases, in previous speeches and we have seen it again today. We have previously heard of how ‘satisfyingly dynamic’ his year has been, or how he is in ‘hot pursuit’ of new airlines or how he has pursued a ‘vigorous policy’ in this and that. The man has lost his true vocation in life which is to be marketing guru rather than a Minister. But has he used this skill for Gibraltar’s benefit? Let’s look at the facts shall we?
Cruise line industry
A constant irritable, I am sure, for him, reminder on the occasion of each of my budget speeches. The Chief Minister, patronisingly pointed out to me in his reply last year that my exposition of the poor cruise industry figures was misconceived because silly me I should have realised that cruises were booked a year or so in advance so that I was being critical of the last administration. Well quite apart from the fact that that argument is no longer available to him because 2 years in and despite the Minister’s much vaunted ‘one to one meetings’ marketing strategy the figures in comparative terms to when the GSD have gone down.
But you see it was the Minister himself who used, in his first budget speech in 2012, what he described as improved cruise passenger arrivals as the result of his new found marketing policy. At that stage (ie May 2012) the figures were indeed looking as if they were on the rise. Little was he to know at the time that the final figure for 2012 was going to be 33,253 lower than in 2011. The figures cannot be used when they suit you and not when they do not.
But you see the final position for 2013 is nothing to write home about, with cruise liner arrivals although higher than in 2012 at 179 compared to 173, the figure represents 8 less than the position in 2011 and such a distance away from the top figure of his predecessor of 238. As I have told him before, the magic is not in the total number of cruises, welcome as a higher number may be, but in how many passengers they bring. It is here where the picture is not as rosy as he would let us believe with his spinesque use of language. The total figure for passenger arrivals for 2013 has come in at 278,139, a full 46,994 less than where we left it and 13,741 less than in 2012.
I am sure the Minister regrets much of what he said in 2012. You see a much more politically mature position to have adopted is to have recognised the sterling work done by his predecessor and then said ‘I will try my best to build on that’ and then say ‘but it will take at least 2-3 years for results to show’. But he has placed so much store on his personal contact form of marketing and was so quick to attribute the success of that policy to the misleading increased figures he saw when he gave his budget speech in 2012 that I feel compelled to expose the fallacy of what he is arguing.
He really needs to work out something else to reverse a potential downward trend. This is all the more so when we look at the lower figures coming through the frontier. We saw about 657,925 less people arriving by land in 2013 than in 2012. If you look at land frontier visitor arrivals the position in 2014 does not promise to get any better if a comparison is done with the positions in April 2014 and 2013. 221,800 less motor vehicles coming through if one compares the April to April figures for 2014 and 2013. There are less visitors to the nature reserve.
Which brings me to the point which we have made previously about the need to devise a well thought-out strategy to get more people here. The cruise liner industry is certainly a potential revenue earner as is of course our airport but more thinking needs to go into to how to bring new markets here especially in light of the difficulties at the border and the intention behind it which is to put pressure on us economically. This issue came into sharp focus with the Small Business Saturday campaign during Christmas. Whilst welcome as an initiative it cannot be a replacement for new, fresh markets coming to our shores. What that initiative brought was really the same market, ie the Gibraltar market to our streets, there are so many articles which one same individual can buy. Round about the same time the [UK] Travel Association reported that it estimated that almost 4 million Britons would be heading oversees that Christmas and New Year period with Morocco being one of the favourite destinations. Could that market not be targeted for the future by selling Gibraltar as a short stay destination?
In terms of revenue raising the Minister has stated, quite boldly, that his aim was:
‘…to make the GTB self-funding so that the savings made to the tax payer can go towards socially essential services such as health, education, social service etc.’
The fact is that Tourism sites receipts are estimated to be £3.5M for 13/14 whilst the estimated expenditure is at £4.4M, out by almost £1M. Whilst the position in the last GSD year was that revenue stood at £3.3M and expenditure £3.2M, a more balanced position indeed and more in tune with what his stated aim was.
Tourist and Hotel Occupancy Survey Reports, 2013
I take the opportunity now to comment on some of the figures revealed in the Tourist and Hotel Occupancy Survey Reports of 2013 which was laid before parliament last Wednesday.
Here too we see some figures which seriously challenge the spin which we have heard the Minister deploy in his speech.
We see that the tourist expenditure in Gibraltar from those coming via cruises has gone down from the position in 2012 from £10.57M to £9.97M, a figure in 2012 which had itself reduced from 2011 which showed expenditure at £13.16million. The expenditure from yacht visitors is also down from 2012 and many of the previous years to that. Expenditure from visitors from Spain is, as one would expect, considerably down from 2012 (£201.14 M to £161.19 M) bringing the overall tourist expenditure down from 2012 from £244.75 M to £207.24 M. Interestingly for the period between 2003 to 2013 covered in the Report it is the 2011 figures which are the highest.
Although I have covered these figures in detail previously these show also that the overall air, sea and land arrivals are down by 1.1%, 5.1% and 5.8% respectively in each category. Visitor arrivals by air are up by 1.7% for those staying in Gibraltar which must be welcomed although overall down by 1.1% from the position as it was in 2012. Interestingly, according to the Air Traffic Survey, 2013, although the number of total flights has gone up from 2012 to 2013 (1,755 to 1,780) that figure still remains lower than the position in 2011 where the figure stood at 1,814 or the peak in the period between 2006 to 2013 of 2009 where the total number of flights stood at 2,121.
In all the other areas, some of which I have already touched upon we see reductions, for example, the total visitor arrivals by land, the number of motor vehicles and the number of coaches are down respectively by 5.8%,12.7% and 18.6%.
I would also refer to the Hotel Occupancy Survey of this year which was also laid before Parliament last week. Although it will be the subject of greater analysis over the next few days I would point out that the room nights sold albeit higher than in 2012 remain lower than the position in 2011. It is welcome to see that the room occupancy rates are slightly higher than they were in 2012 (59.3/61) although still not as buoyant as they were in 2003 to 2005 where the average for those three years stood at 67 %. The number of arrivals is also slightly up on 2012 (52.3/54.1) but still slightly lower than in 2011 which stood at 55.6.
Hotels
Given the figures I have referred to they really do put into some perspective the Hon member’s statement at last year’s budget session where he said:-
“The Government shares the Chambers view that tourism is the lost pillar of the economy, which can remain resilient even in times of economic hardship”.
Last year the Minister announced that a project which would “start soon” and one which had been planned for some time now was the Leicester Hotel explaining that this would add to the current 4 star hotel offer in Gibraltar. I know we have had many lively debates as to what the word ‘soon’ means in this house but again the Minister’s statements need to be questioned when a year on there appears to be no movement in relation to this particular project.
Port
I take this opportunity to congratulate the new Gibraltarian Captain of the Port, Mr Bob Sanguinetti in securing the appointment. We all know from this side of the House that he has a very hard act to follow in Captain Roy Stanbrook but we wish him all of the best in his endeavours.
The figures here too do not support the picture which the Honourable Minister seeks to paint and there are some warning signals in them which he should heed.
The number of ships which have called for bunkers has dropped as at May 2014 from the comparable position in May 2013. The figures being 2,300 compared to 2,576, with a difference in Gross Tonnage of some 11M. Although I note that although the forecast outturn for 13/14 in respect of Port Arrival and Departure Tax and Bunkering Charges are up from the estimated amount the overall expectation is that the GPA will be less of a revenue earner than previously if one goes by the estimate figure for 14/15. The Minister has denied that there is any political pressure from Spain and I trust therefore that that is the case but the Government should do everything within in its power to reverse what appears to be a downward trend given the apparent importance of this activity to the economy.
I take this opportunity too, to acknowledge the sterling work which is being done by the Gibraltar Maritime Association led by Mr Richard Montado. Here we have seen increases in the number of vessels registered in the last two years which is a continuation of the increases which can be seen since 1997 after we came to office. The figure then was 27 vessels with a GT of 330,000, the figure now stands at 332 vessels with a GT of 3.4M. Here too the Minister is still to beat the increases presided over by the GSD between 2001 and 2002 with an increase of 45 vessels and between 2008 and 2009 with an increase of 38 vessels.
However where we are also seeing a downward trend is in the number of ships calling. The overall figure, which includes bunkers, for 2011 stood at 275M GT, for 2012 it was 277M GT and for 2013 it is at 254M GT. Yacht arrivals are also seeing a dip from 2011 figures with almost a reduction of 1,000 between 2011 and 2013.
Aviation
In aviation, another of my areas of responsibility we see how there has also been a reduction in the number of scheduled flights at least on the 2013 figures I have seen although it is gratifying to see that there has been greater use put to the airport (other than as a very attractive backdrop to the Chief Minister’s appearances on Spanish TV) given the slight increase in numbers of passengers arriving in it from 2012 under the ‘UK scheduled flights for seats used’. Here too more must be done. The Minister has previously referred to widening links to other destinations, these need to be established. We have seen how the Marrakesh flights which was welcomed with so much fanfare by the Government appears to be faltering with very low load factors.
And I take this opportunity to refer to the recent press reports regarding the despicable actions being taken by Spain with regards to Gibraltar Airport’s exclusion now in relation to the Association Agreements with Georgia, Moldova and the Ukraine. These actions on the part of Spain represent a flagrant breach of the obligations under the Cordoba Agreements of 2006 and we in the opposition condemn them wholeheartedly.
Employment
Now I turn to the Minister for Employment, the Hon. Mr Bossano. The Hon member will no doubt recall when in my last budget speech I described him as a leopard which never changes its spots and his retort under his breath was that they were ‘good spots’. Well, I and indeed the majority of the electorate on 8 occasions out of the 11 elections in which he has stood (73% worth of elections!) have agreed with my assessment and not his.
On the last occasion I referred to many of the outlandish statements which he made which included some like Gibraltar being, at the time when there were 12 Nation States in Europe the ‘13th Nation State’. I also referred to a statement he made publicly during this term of office that he would eradicate unemployment. Those of us who have observed the Hon. Member in his political career for many years will know that he is prone to making such statements even if he then fails to deliver.
The same happens with his manifesto commitments. The parties now in power have made a song and dance of the primordial importance which they lay on the delivery of, as they have described them on umpteen occasions, their very specific manifesto commitments, but when it comes to the Hon. Member what he does in practice very rarely reflects what the tin says.
It is therefore important to analyse what was promised to the electorate at the last General Election, an electorate which, in so many respects was fooled into believing that what was promised would be delivered. At page 25 of their New Dawn manifesto, under the title “Future Job Strategy”, it states very clearly that as from the 1st February there will be “a new dedicated training strategy with a maximum of three years and a guaranteed full time job on completion”. It then goes on to read, and this is the purposely confusing bit, that all “trainee employees” will be covered by a contract of employment with a “wholly owned Government company”.
Just dealing with that last point first. For those of us on this side of the House who were following employment matters very carefully at the time of the election it was very clear that the impression that was sought to be given was that the ‘full time job on completion’ would be within a Government owned company. This is not what in the event was rolled out on 1st February. But perhaps, on a very strict analysis of the words, it is possible that what in fact has been rolled out is what is described in the manifesto although this is rather odd given that the Hon member falsely describes himself as being a plain speaker and borrowing one of his favourite phrases, is proud to call “a spade a spade”. Why did he not use clear language? The answer must lie in that he wanted people to give the words the alternative and more electorally favourable interpretation which I described earlier.
The important part of the text is that which refers to a ‘dedicated training strategy’. This it clearly is not. There is nothing in the nature of a strategy in the FJS. It would have been different if the Hon. Member had set out a detailed plan on how he was going to provide training, training with proper qualifications within a certain period of time which would give our kids the opportunity to better themselves, to transfer those skills, to obtain real jobs, real employment with good prospects for the future. Proper vocational training that is what they are asking for and what is required. But this alas was not what has been on offer and the fact is that there simply was no strategy for this.
The House will recall when the Hon. Member claimed that initially the trainees would be employed for an 11 month period (the impression given in the manifesto that it was for 3 years is very quickly discarded); it then it became a variable period depending on how much “training” was required and now it is pretty much a standard 3 month period of supposed training. No evidence there of any forethought, of any forward planning, of any, dare I say it, ‘strategy’.
And why do I say ‘supposed’ training? Because there is simply no substantive training involved. What the Hon member is providing at great expense (he knows that this is a dividing line between his party and my party given that it has been the subject of public debate), this is nothing other than a very expensive placement programme running, just in salaries, although there are added costs, as at April 2014 at £12.606 M.
Then he claims that there are all these companies in the private sector that are so enthused by his strategy that they are almost queuing up outside his office at ETB or Town Range eagerly waiting to sign those partnership agreements with him. I have asked him both in this House and outside of it for details of these companies but he flatly refuses to provide them. What evidence can he show other than numbers on a piece of paper that the private sector is genuinely engaged? On the basis of the anecdotal evidence that I have from speaking to people in the private sector and not just in the construction industry, because we cannot forget that although the Hon member has an obsession with the construction industry, according to the manifesto commitment the FJS is not limited to that particular industry, there is no evidence that this is being welcomed by them. Speak to the stakeholders out there. Speak to the retailers up and down Main Street.
The reality probably is that those companies which he is referring to as being participants in the scheme are simply doing so because in the main they will be receiving Government work. Indeed, he has said so himself that as part of the deal if you want to set up a company and have it registered in Town Range or No. 6 as part of his supposed so-called start up companies (yes remember those which nobody knew about until we raised it following a search at Companies House!) the quid pro quo is that you take on these trainees.
This is not a genuine effort by the private sector to engage with the State in assisting our young and unemployed in bettering themselves by obtaining good quality qualifications. It is far from it. The scheme, on the basis of the evidence that we have, is nothing other than an artificial scheme supported with large amounts of public money, millions of our pounds, in order to get people into jobs in the short term without any regard or account being taken of the medium to long term future of these individuals. What a shoddy way of dealing with people’s lives. What short termism and lack of foresight.
Does he not realise that very few people are with him? I refer in particular to the very courageous move by the Young Members Committee of Unite the Union who put their head above the parapet and criticised the fact that there is simply no vocational training in Gibraltar. What were they treated to? They were treated by the Government to a rather despicable statement suggesting that this was done under influence of the GSD. Pointing the finger at one of these young individuals accusing that person of having GSD affiliations, but does he not know that others within the Committee are more than likely to have been supporters of his own party? Of course it was not convenient to mention that was it? A very sad state of affairs indeed but one which forms part of the political makeup of the Hon member.
Only last week we saw how the editor of the Chronicle had this to say about a part of his FJS scheme and how it impacts on expenditure generally:
“The provision of summer jobs, the graduate schemes are great for short periods and keeping these youths out of the ‘true unemployment’ figures, but true employment for young Gibraltarians, especially graduates flowing back home, requires sustained development of the economic machine.”
And that must be right. It is the private sector which can best provide the real and sustainable jobs for our young people.
Let me turn now to some of the very interesting figures which the Hon member has provided. Although he provided these figures on the mistaken premise that I had asked how many trainees were placed with private employers when in fact I asked how many trainees had actually been employed by the private employer they are notwithstanding very interesting indeed. What they show very clearly is that as time has gone by there are significantly less employers taken on 4 or less employees and more employees being taking on by one employer. For example, when the scheme started it shows that 120 employers took on 1 trainee yet by month 17 of the scheme there was one employer with 24 and as little as 53 employers with one trainee compared with the highest number at its peak of 266 employers providing placements for 1 trainee!
The House will be aware of the criticisms we have levelled against the scheme as one which simply shoehorns people into placements and then employment and if the figures I have quoted do not reek of shoehorning I really do now know how I can best persuade members opposite that this scheme should be abandoned.
There is no real engagement with the private sector. Instead of using public money in the manner that he is doing he should encourage and enthuse a willing private sector to participate in the investment in real and proper training. Only then will we go some way to plug the skills gaps he talks about. We are not against good workplace based training which subjects trainees to rigorous assessments. What we are against are expensive make-work schemes.
I would encourage the Hon member to re-engage with the private sector as we did in government. Where we entered into partnerships with companies in the telecommunications, electrical engineering and casino trades for example. A venture which was well received and has resulted in quality jobs and qualifications.
The Hon member is very fond of describing the GSD scheme as the “so-called” vocational training scheme well I am equally as fond of calling his scheme the “so-called” Future Job Strategy or as many are describing it already the ‘Failed’ Job Strategy.
Going back to the question of whether there is proper and real engagement with the private sector. If that had been the case why is it that his department has been unable to persuade even the Sunborn to take on a substantial number of trainees. In an area where he himself has recognised as being one where there is a dearth of local people wanting to engage in this type of work; in an area in which, if all the promises made by the Minister for Tourism are to be believed, will see further hotel growth in the immediate future; from a private sector employer who has been the beneficiary of public money, in a very big and real way. Our money to the tune of in excess of £30million and yet not even they can be persuaded to participate freely and willingly and enthusiastically in their training scheme. Mr Speaker, what a joke.
Why is it that despite the promise by the CEO of the Sunborn that he was placing 200 foundation jobs – whatever those are – with the ETB where the CEO was wanting to embrace the local employment market, talking of providing training locally and yet a mere 46 Gibraltarians had managed to secure jobs as at May this year. Does he not recall his words in this House when he said that he was:
‘totally committed to ensure that every single Gibraltar resident that, as a result of the policies of the government, has been faced with an avalanche of competition from outside Gibraltar, will not be put in that situation from 1st Feb on.’
Another cast iron guarantee which seems made of a more malleable metal than he professes.
Let’s go back to page 25 of their manifesto. Under the heading “Skills Audit” there is another promise to carry out “a full skills audit of the labour market” which they claim will be undertaken “in the current financial year to prepare the final action plan of the Future Job Strategy from April 2012”. What a reneging of such a clearly worded manifesto commitment, one which is not open to any possible alternative interpretation than what it actually says. I am not sure whether the Hon Deputy Chief Minister’s duties as the box ticker of manifesto commitments include the crossing some of them out.
I am afraid that there is no wriggle room out of this one. They are in such difficulty that the Hon member who is not a particular fan of lawyers actually had to rely on the Hon Minister for Justice on one of the interventions to defend him by using as much legal imagination as possible in defence of the indefensible.
With the greatest of respect to him it was a good try but it simply doesn’t hold any water whatsoever. Why don’t they just admit it? They pulled the wool over people’s eyes and they continue to do so.
All of this it begs the question. What is the final action plan of the FJS which we were are all waiting with baited breath would be implemented by April 2012? Or is it that what has been dished out for the last two and a half years is not the final action plan after all?
But then let’s also look at the skills audit which is apparently being conducted. Skills audits, in my book should be carried out, and done professionally establishing not simply what the requirements are today, but also what the requirements will be from the employers’ side in the medium to long term. If there is, dare I say it, to be a strategy there has to be forward thinking and forward planning as to what the needs of Gibraltar’s economy will be, identifying those needs and there yes there is an obligation on the part of the state to provide as much assistance so that our residents are able to satisfy those needs. It is an exercise like this which will assist you in developing proper skills policies. Nothing like that is happening. What we are seeing as far as we can see is a rather rudimentary exercise which is a far cry from what I have described in very brief terms.
I have noted in the budget book that it is proposed to reduce quite considerably and dramatically the staff compliment at the Employment and Training Board from 38 to 14. What is going on at the ETB such that it has actually featured in the Ombudsmen’s Report for this year where he states:-
“I have to make special mention of the Employment Service where there has been a significant increase in complaints curing this year. The average complaints for the years 2010 to 2012 was 6 per annum, whereas during 2013 we have recorded a total of 23 complaints. The nature of complaints has ranged from lack of replies when seeking information to alleged unprofessional treatment and dissatisfaction regarding claims for payments under the Insolvency Fund.
It is to be hoped that this increase has been due to a transitional period of staff changes and/or shortages. As Ombudsman, I will closely monitor the trend over the coming months and if there is no change I shall have to meet with senior management to express my concerns and offer the assistance of my office to identify and address pockets of concern.”
What is going on at the ETB which requires a dedicated public officer to liaise between it and the Gaming Industry? The Hon Member for Financial Services will recall that he made the announcement in a debate that I had with him on GBC back in January and it is something that I welcomed if it was to improve the service to such an important industry group. But does the fact that this is required speak volumes of the lack of service which is being provided at the ETB for which the Hon member is ultimately ministerially responsible.
And then we will move on to the Labour inspectorate. Here there very clearly is a difference in approach but more importantly in mind-set between them and us. We have seen how the Minister has no compunction whatsoever to appoint by Gazette notice some 6 individuals as labour inspectors under the statutory authority of the Employment Act. These individuals have quite important and draconian powers to act as labour inspectors and yet they are trainees. I make no comment as to their competence but the fact that they are trainees would suggest that they should not have had the benefit of a fully fledged appointment under law. They are not professional public servants. Who is to stop any of these individuals from exercising, for example, the right to enter premises or seek disclosure documents? The answer is nothing. This coupled with the fact that the original compliment of civil servants is no longer there must result in a much poorer service being provided and therefore unscrupulous employers getting away with much more than they would otherwise ordinarily do because the Minister has suggested that the intention is that the trainees are to be limited to carrying out research. Who then is doing the inspecting?
And finally I move on to the Employment Survey, 2013. What we see here is a continuing increase in public sector employment by 7.8% from last year which itself had grown from 2011 by 9.1%. It is interesting to note that despite the Minister’s stated policy the growth in the number of Gibraltarians in jobs has been reduced from 5% in 2012 to 1.2% in 2013.
Although we see more Gibraltarians in the construction industry, for example, than Spaniards, a bee in the Minister’s bonnet, one would need to see how many of these are employed through the public sector. We see a considerable jump from 162 to 261 in the number of Gibraltarians employed in the construction industry under the ‘Wholly Owned Government Companies’ section . Interestingly there is also a jump under that same section in the ‘public administration’ industry group between 2011 and 2013 from 1 to 150! The totality in wholly-owned government companies has gone from 491 in 2011 to 908 in 2013, with in excess of 500 more Gibraltarians than in 2011. Whilst from a very high level perspective that should be welcomed it is in fact a distorted figure given that many of these will be accounted for by the fact that they are employed in the FJS scheme companies which rank as government companies. Indeed the total for full time jobs in the private sector shows Spain beating Gibraltar 581 to 452. So the conclusion to make is that the increase in the number of jobs for Gibraltarians in the construction industry is being driven by the public sector and therefore with public money. Arguably even those in the private sector could be driven by public money given our view of the reality of how the FJS works.
Financial Services and Gaming
I will deal briefly with one of my other areas of responsibility which is financial services.
One of the threats which we continue to face is that of the Point of Consumption Tax which the UK is introducing. This issue must be one of the central ones which concern the local gaming industry, an industry which continues to be very much welcome in Gibraltar. The need to ensure steady and responsible growth in this area has been the subject, quite rightly, of cross party consensus. We did it in our time and the current government continues to do so.
The Opposition notes the recent press reports which revealed that the Gibraltar Betting and Gaming Association had written to the UK Government and the Gambling Commission a letter before action. Mr Howitt, the president of the GBGA, was quoted as saying that the new law, which reportedly seeks to establish the UK Commission as the industry’s world-wide regulator would, with the planned tax changes, drive consumers to the unregulated or poorly regulated market. This issue was a central one in the analysis which the GBGA made on the impact of the UK Government’s point of consumption proposals.
I encourage the government to do all it can do to assist the industry’s continued presence here. In this regard it is of crucial importance that the ‘softer issues’ such as the service provided by the ETB, broadband connectivity, electricity supply, banking, accommodation and frontier flow are addressed as by the government.
One further development has been the setting up of the Gibraltar International Bank. We have debated matters relating to regulation of the bank as well as its setting up. The Chamber of Commerce has emphasised the importance that the bank operate on an arm’s length basis, independently of the Government and under proper management and subject to all the rigours of FSC regulation and supervision that would apply to every other bank in Gibraltar. We agree with this analysis. We will be keeping a watchful eye particularly in relation to the bank’s lending terms and whether they are commercial especially in light of the expected requirement that there will be for lending once the new housing estates come on stream, and how the Government bank seeks to invest its retail deposits and regulatory capital.
The imminent arrival onto our statute book of the Solvency 2 directive on insurance (codifies and harmonises EU insurance regulation), which regulates the amount of capital that insurance companies in the EU must hold to support its business. The concern here is how the more stringent capital requirements will impact on smaller Gibraltar insurance companies. This is an important consideration because whilst the Gibraltar insurance industry has grown considerably over the last 14 years in particular, it is still predominantly made up of smaller insurers, operating with the constraints of lower capital base than the larger players operating either in Gibraltar or elsewhere.
According to the latest statistics, the local insurance sector employs 240 people, the majority of whom are Gibraltarian. The industry is also an important contributor to government coffers in terms of corporate and PAYE tax and other fees such as rates and rents no doubt. For all these reasons this is a matter which will require considerable sensitivity from both the Government and indeed the regulator.
The issue, as reported in the press, is of concern to those in the industry locally. One of our local insurance stakeholders has openly accepted the logic behind Solvency 2 but equally has concerns about the timescale to achieve compliance with the requirements and that, to quote him, some people in the industry need to have a ‘wake up call’.
I note that the Government is working with the Gibraltar Insurance Association and the FSC in a joint steering committee dealing with the transposition of the directive. We welcome this. We also note that the industry has recently been asked to contribute towards the regulatory cost of implementation of Solvency 2 through a direct levy, which they have agreed to.
In relation to the FSC, I take this opportunity to welcome the arrival of Samantha Barrass as its new CEO who replaces Marcus Killick. Mr Killick’s work over his 10 years on the job has to be recognised and acknowledged. The ability to maintain a fine but crucial balance between proper regulation to maintain Gibraltar’s reputation as a finance centre whist at the same time provide the flexibility needed to make our financial services work is one which we hope Mrs Barass will be able to emulate.
